Seattle Real Estate: What is Escrow?
One of the most common questions I get is, “What is Escrow?” Such a misunderstood part of any real estate transaction, Escrow can vary from State to State. However, in the State of Washington, Escrow is the depositing of funds and documents by the parties with an impartial third party for delivery upon completion of the terms of the escrow instructions. The Escrow holder impartially carries out the written instructions given by the principals (seller, buyer and even the lender) per the Purchase & Sale Agreement and Addendums. This includes receiving funds and documents necessary to comply with those instructions, completing or obtaining required forms and handling final delivery of items to the proper parties upon the successful completion of escrow.
The escrow officer must be provided with the necessary information to close the transaction. This may include loan documents, tax statements, fire and other insurance policies, terms of sale and any seller assisted financing and requests for various services to be paid out of escrow funds.
The Purpose of an Escrow is to enable the parties in a real estate transaction to deal with each other with less risk since the escrow holder acts as:
- Custodian for funds and documents
- A clearing house for payment of demands
- An agency to perform the clerical details for the settlement of the accounts between the parties
A Typical Escrow Transaction begins with the customer giving the necessary information regarding the transaction and requesting that we order a preliminary report. A Preliminary Report provides the customer with an analysis of the present status of the property as revealed by the public records filed or recorded in the county in which the property is located.
Upon receipt of the Preliminary Report, an analysis is made to determine the necessary action and documents required to complete the transaction; demands for satisfaction of liens not acceptable to the buyer and/or lender; documents for recording; instructions and requirements of the new lender. In most areas buyers and sellers instructions are prepared for signature from the information gathered.
When all the title and financial requirements are met and instructions from all parties can be fully complied with, the escrow is said to be in perfection” and can close. Then the financial settlement takes place, the documents are recorded and the title insurance policy issued.
You may be asked to complete a Statement of Identity or Affidavit of Identity as part of the paperwork. Because many people have the same name, the Statement of Identity is used to identify the specific person in the transaction through such information as date of birth, social security number, etc. This information is considered confidential.
During the escrow process you are still required to make your payments on existing loans so that you do not incur any late fees or damage your credit.
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March 3rd, 2010 at 9:30 pm
[...] WA Seattle Real Estate: What is Escrow? One of the most common questions I get is, “What is Escrow?” Such a misunderstood part of any [...]
March 6th, 2010 at 1:39 pm
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March 29th, 2010 at 8:01 am
Thanks for the comment-I would love to have you share this with anyone you know in your area that is either in real estate or in escrow (if escrow is available in your area) and have them look this over for accuracy.
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